Just a short hop along the M62 from Morrisons, fellow northern-based retailer The Co-operative Group is also feeling the effects of a 'quantum leap forward'. As at Morrisons, everything seemed rosy a year ago. The Co-operative Movement unveiled record profits, largely the result of an acquisitive spree by the Co-op Group.

But integrating the vast estate of convenience stores that stretched the supermarket chain's reach into the south and south east is proving hard work and has hit profitability hard. Operating profits have slumped to £244 million from £327m the year before.

'Integrating the 600-plus Alldays stores has meant we incurred distribution and logistical problems and perhaps we took our eye off the ball while we have been sorting those out,' says spokesman Martin Henderson. 'We have a new national distribution centre in the Midlands and we hope that this work will start to show by the interims towards the end of this year.'

The Co-op's shift from its traditional sphere of operation has had a direct impact on jobs. Group chief executive Martin Beaumont was forced last week to announce that 600 jobs in the group's Manchester head office will go. 'Traditionally, the Co-op was a manufacturer and food processor and it has increasingly become a consumer-facing retailer,' says Henderson. 'We need to restructure to put the head office functions in tune with the business.'

The job cuts at the Manchester office will be made in departments including human resources, IT, marketing and finance. The Co-op is meeting union officials from Usdaw on Thursday for negotiations. Usdaw has questioned whether axing 'hard-working' and 'experienced' staff is the best way to cope with the 'serious difficulties' being faced.

As with Morrisons and its Safeway acquisition, the buy-ups have stretched the Co-op beyond its limits. The food division's operating profits plummeted to £47.8m from £74.5m last year as it continued to face integration problems with the assimilation of 775 stores bought from Alldays, Conveco and Balfour.

A new chief executive for the supermarket division, Guy McCracken, started work last Monday. McCracken, a former food managing director at M&S, replaces Eoin McGettigan, who resigned three months after he started. McGettigan, who came from convenience chain Budgens, denies he is leaving Co-op because of operating difficulties; he has been 'made an offer I could not refuse'. McCracken, the third chief executive in 12 months, is expected to strengthen the Co-op brand across the vast new estate.

Henderson denies that the Co-op Group has bitten off more than it could chew with this, the fastest expansion in its 150-year history. 'We had to make those acquisitions when we did because they would simply not be around now.'

The Co-op Group has declared its interest in the Somerfield chain of supermarkets - very strong in the south west - and was also interested in the Londis chain when it came up for sale.

Beaumont's decision to axe 600 jobs last week follows the 2,500 redundancies from the insurance arm six months ago. The financial services arm's chief executive, Mervyn Pedelty, announced a surprise retirement (he was 55) the following month, with a £1m-plus pay-off.

Beaumont's empire includes pharmacy stores but is just one component of the wider Co-operative UK group, headed by Dame Pauline Green. The wider UK movement, which includes travel agencies and funeral directors as well as co-operative societies, tumbled in the last 12 months to £357m profits from an all-time high in 2004 of £440m.

In contrast to Beaumont's acquisition strategy, one of the better-performing societies was United Co-operatives. It is the largest independent society, based in Rochdale, the movement's historic home. It achieved profit growth of 22.4 per cent to £43.5m, while the Leeds Co-op grew profits 38 per cent. Both societies focus on their traditional heartland.

Green insists that co-operatives are, in any case, not just about making profits, but sharing a social vision. 'We know that by improving their financial performance, co-operatives are in a stronger position to meet their wider social objectives, and that is our focus for 2006.'

This will be small comfort to the 3,100 employees deemed surplus to requirements at the Co-op Group. Whether or not southern shoppers warm to northern retail values is a moot point, but the Co-op Group, as much as Morrisons, is certainly finding the pace of expansion away from its roots hard going.